When Land Promises Fall Through: Proprietary Estoppel, Contractual Duties and Boundary Realignment in NSW Property Law

In a recent decision of the NSW Supreme Court, Hederics v Spare Weel Pty Ltd [2025] NSWSC 1171, Justice Williams considered the breakdown of a farming partnership and a subsequent dispute over land ownership – raising important questions about proprietary estoppel, boundary realignment, and implied contractual obligations. The outcome is a timely reminder for rural business operators and landowners in New South Wales of the legal complexities involved when business separations intersect with property transactions.

Background: Business Breakdown and a Disputed Land Deal

The plaintiffs, Mr and Mrs Hederics, had for some years operated citrus fruit farming and packing businesses in far western NSW in partnership with Mr Kees Weel. These businesses were run through corporate vehicles, with each party holding different shareholdings in the companies Belah Heights Pty Ltd (BHPL) and EJT Packers Pty Ltd (EJTP).

In 2020, the relationship between the partners deteriorated. Allegations arose that a company associated with the Hederics had been selling partnership produce and retaining the profits. Following this, the parties moved to dissolve the partnerships and formalised their intentions in a Heads of Agreement. One key aspect of that agreement was a land deal.

The land deal

Under the arrangements, the Hederics agreed to sell their interest in the “Nursery Block” to Mr Weel’s associated entity, Spare Weel Pty Ltd. Crucially, the parties agreed that the Hederics would be granted an option to repurchase a smaller portion of the land – the Nursery Riverside Block – once a boundary realignment and subdivision had occurred.

This option was formalised in a Call Option Deed entered into upon completion of the sale. However, the option was subject to a condition: it had to be exercised before the earlier of 30 days after the relevant plan of subdivision was registered or a “Sunset Date” (15 months after the option deed was signed).

When the required registration did not occur before the Sunset Date, the Hederics served a notice to exercise the option – which the defendant rejected. This led to the Supreme Court proceedings.

The Claims: Estoppel and Breach of Contract

The plaintiffs advanced two main arguments:

1. Proprietary Estoppel by Encouragement
   They alleged that they had relied on representations by the defendant – namely that “everything would be done” to ensure the boundary realignment went through – and that the defendant should be estopped from denying their entitlement to repurchase the land.

2. Breach of Contract
   They claimed that the defendant breached implied obligations under the Call Option Deed, including:

   • An obligation to do all things reasonably necessary to secure performance.

   • A duty to cooperate and act in good faith.

They sought specific performance (forcing the transfer of the land), equitable compensation, or damages equal to the land's value.

The Court's Findings

1. Estoppel Argument Rejected

Justice Williams was not persuaded that the representations said to support the estoppel claim were made.

“A state of actual persuasion is required before finding any fact,” his Honour said, quoting GLJ v Trustees of Roman Catholic Church for Diocese of Lismore [2023] HCA 32.

The Court applied the standard in Watson v Foxman (1995) 49 NSWLR 315, recognising the fallibility of memory over time, particularly where litigation is involved. The evidence relied on by the plaintiffs, including recollections of conversations years earlier, was not found sufficiently reliable.

Accordingly, the plaintiffs’ estoppel claim failed.

2. Breach of Contract - But No Loss Proven

The Court did find that the defendant had breached implied contractual duties - including the obligation to act in good faith and to do all things reasonably necessary to enable the performance of the contract. For example, the defendant delayed engaging with critical steps required to obtain a subdivision certificate and register the plan.

However, the plaintiffs' claim still failed. Justice Williams held that:

• The delays were not shown to have caused the plan’s failure to register before the Sunset Date.

• The Call Option Deed contained a clear and fixed time limit.

• The plaintiffs themselves had some responsibility for the delay, including submitting an incorrect development application initially.

As such, while there was technically a breach, it was not causative of the plaintiffs’ loss.

Key Takeaways for Property Owners and Rural Businesses

1. Be Wary of Informal Assurances

This case reinforces that verbal assurances, even if well-intended, are rarely enough to override formal contractual terms. Where a contract includes a strict expiry date, as the Call Option Deed did here, courts will enforce it unless clear, unambiguous representations to the contrary are proven.

2. “Time Is of the Essence” Really Does Matter

The Call Option Deed expressly stated that “time is of the essence”. This meant that deadlines were not mere formalities. Once the Sunset Date passed, the plaintiffs lost their right to exercise the option, regardless of what may have occurred behind the scenes.

3. Implied Duties Only Go So Far

Even though the Court acknowledged the existence of implied duties to act reasonably and in good faith (drawing on Codelfa Construction and BP Refinery principles), a breach of these duties will not result in damages unless it directly causes the loss.

4. Boundary Realignments Are Complex and Time-Sensitive

The practicalities of boundary realignment, including development consent, subdivision certificates, utility easements, and title registration, can involve multiple agencies and delays. Parties should build generous timelines and clearly allocate responsibilities in writing. Where one party must take steps (as the Hederics were required to), reliance on the other to “help make it happen” without enforceable terms can lead to disappointment.

Conclusion: The Need for Clear Terms and Practical Legal Advice

Hederics v Spare Weel Pty Ltd is a cautionary tale. It highlights the pitfalls of relying on assumed cooperation when timelines are legally strict and contractual rights are limited. For rural landowners and business partners seeking to dissolve their arrangements or restructure property holdings, the key message is this:

• Ensure that all rights, particularly options, buybacks, and post-sale entitlements, are clearly recorded and timeframes are achievable.
• Don't rely on memories of what was said in a meeting, make sure every promise is in writing and reflected in the legal documents.
• Engage legal professionals early when managing complex land transactions, especially those involving boundary realignments and council approvals.